Another big day for the CAD

This blog is not only about foreign exchange rates and the Canadian dollar even though I know my latest post and this one have focused on it. It is just that the volatility in the markets does have an effect even on small businesses.

Having the Canadian dollar gain almost two cents against the US dollar is bound to have an affect on the price of our goods compared to our US competitors. The US dollar was hit again due to concerns about the effect the proposed $700 billion bailout package for financial institutions holding bad debt. In addition the CAD was supported by gains in oil price as crude oil futures saw the single largest one day gain in the contract's 25 year history.

This morning the release of Canadian CPI numbers for August and the headline data was in line with expectations while core CPI was actually stronger than expected. With this rise in core inflation, it looks like the Bank of Canada might not be able to impliment rate cuts as the market had been pricing in recently.

In the US, Fed Chairman Bernanke is scheduled to speak before the US Senate at 9:30 AM, however, Bernanke's remarks were leaked before 7:00am today and he is sounding very dovish. In his statement he said that global markets are under "extraordinary stress" and that "action by congress is urgently required to stabilize the situation and avert what could otherwise be very serious consequences for our financial markets and our economy".

A lot has changed over the past few days. Since Friday morning the CAD has gained 5 cents on the US dollar and continued strength in the CAD seems likely.